Fashion Retail Marketing by Becky Harris

BURBERRY RETAIL AUDIT

REBECCA HARRIS 24934364 ARTD 2042 FASHION RETAIL MARKETING

CONTENTS 1 - Executive Summary 2- Brand Evaluation 3- Brand Evaluation: Licensing & Franchising 4 & 5- Brand Evaluation: Corporate Social Responsibility 6- Brand Evaluation: Supply Chain & Ecommerce 7, 8 & 9- Financial Summary 10 & 11- Product Range Analysis 12- Positioning Map of Competitors 13- Marketing Environment Diagram 14, 15, 16 & 17- Marketing Analysis inc Internationalization 18 & 19- Challenges and Opportunities 20- Recommended Strategies 21- Recommendations and Enhancements 22- Bibliography 23- Appendice 1- Burberry Collection Pyramid 24- Appendice 2- Pricing Strategy 25- Appendice 3- Ansoff ’s Matrix: Current Strategies 26 & 27- Appendice 4- Burberry’s Consumer Profiles 28- Appendice 5- Fragrance Press Release 29- Appendice 6- Retail Location Strategy 30- Appendice 7- Four stages of fashion designer foreign market development 30- Appendice 8- Kotler & Lee’s 6 Types of CSR Initiatives 31- Appendice 9- Burberry’s Global Environmental Policy 31- Appendice 10- Focus group research taken from “Market for Sustainabile Fashion Briefing, Ethical Fashion Forum 32- Appendice 11- The Iceberg Theory of Cost Comparison 33- Appendice 12- Kent & Omar’s Strategic Sourcing and Supplier Relationships 34- Appendice 13- Burberry’s position in Retail Life Cycle 35- Appendice 14- LFL Comparison: Trench Coat 36- Appendice 15- LFL Comparison: Handbag 37- Appendice 16- PEST Analysis 38- Appendice 17- Burberry’s Price Architecture 39- Appendice 18- 3 Strategies for Retailer Internationalization 40- Appendice 19- Burberry SWOT Analysis 41- Appendice 20- Ansoff ’s Matrix- Future Opportunities 42- Appendice 21- Louis Vuitton SWOT Analysis 43- Appendice 22- Fishbone Analysis

EXECUTIVE SUMMARY

Burberry is a global luxury brand which was established in 1856, and started as simply an outerwear store in Basingstoke. Since supplying trench coats made of the brand’s own Gabardine material in the world war, the brand has become famous for its core outerwear products, and its check pattern globally recognised. The changing retail landscape and nature of the luxury market will have an effect on the way in which brands will create desire and retain existing customers through product and services. Being a prominent luxury brand, Burberry needs to stay at the forefront of competition through not only holding onto the brand’s leading digital position, but by developing new ways of keeping the luxury positioning and status. The definition of luxury is changing due to democratization of fashion through internationalization and technology. Consumers in emerging markets are becoming educated faster on fashion and develop sophisticated demands quicker than the saturated markets have done so before. Burberry is still experiencing financial growth and success however will need to address flat periods and specific markets in need of attention and improvement, explained in the Financial Summary. The Brand Evaluation explores and challenges current strategies of the brand, including its Corporate Social Responsibility and Licensing and Franchising. The Marketing Environment looks in-depth at key macro and micro trends currently taking shape, which Burberry needs to take on board and make efforts to adapt to, including the new luxury trend of “made-to-measure” and further technological developments. Challenges and Opportunities explores the ways in which Burberry can adapt to these marketing trends, and the recommendations include key strategies and enhancements the brand can implement, including through product development and market penetration. -1-

BRAND EVALUATION In the company report, Burberry speaks of “five strategic themes to underpin its growth”, these are to “leverage the franchise, intensify non-apparel, accelerate retail-led growth; invest in under-penetrated markets; and pursue operational excellence.” The brand is implementing a few key retail strategies within these themes. Strategy

Activities

Growth Strategy

• •

Product Strategy

• Increasing men’s tailoring • Offering “Bespoke” personalisation service for trench coats • Ending some licensing agreements and taking direct control of product, e.g. beauty, fragrance • Buying out profitable franchisees in under-penetrated markets

Integration Strategy

Communications Strategy

Pricing Strategy (appendix 2)

Entering new markets Acquiring more of the male market

• Product offering is communicated effectively through social media and IMC • Cultural links to new musicians through Acoustic on Youtube • Seamless promotion of product between stores and ecommerce • Silently increasing price of high demand luxury products to handle volumes

As Burberry is focussing on growth (appendix 3) through emerging and male markets, the brand needs to be careful not to alienate existing customers in other regions. “Like most luxury brands, Burberry has been focusing on growing its Chinese customer base by opening stores and staging events, potentially at the cost of other, more discerning customers. “The need to reach new consumers is beginning to conflict with the perception among those consumers of what constitutes luxury,” writes Scheherazade Daneshkhu” Mau, D (2012). Although men’s tailoring is a good strategy to expand, made-to-measure is a growing trend in womenswear as well, and is discussed later. Increasing the price of high-demand products is a good way for Burberry to retain existing higher-wealth customers (appendix 4) and to keep the level of exclusivity. It increases gross margin and demand. -2-

BRAND EVALUATION LICENSING AND FRANCHISING

Entering new markets through franchise stores provides much less risk to the brand financially, as it is a low cost/ low control strategy, and means that the company has a greater advantage in partnering with business-people who already know the specific market. In the internationalized retailing climate of today, franchising is not uncommon for many fashion brands, and now accounts for over 1/3 of sales in the USA and about 30% in the UK. (Cox & Brittain, 2004). Burberry is continuing to pursue new franchise agreements in potentially volatile markets, including Thailand, South Africa, Croatia and the Baltic States. Testing these unsaturated markets with potential high profits and consumer appeal is a low cost strategy, yet one which holds promise and a way for Burberry to be ahead of competition. Burberry’s tactics towards franchising have so far proved relatively successful, with strong growth in partners in Russia and Turkey, and the transfer of 5 franchise stores in Saudi Arabia to retail in 2012. Opportunity lies in forthcoming years for franchise stores in Russia to be converted to retail.

Retail

CHANNELS OF DISTRIBUTION

• Mainline stores inc As Burberry’s franchising agreements increase, the flagships brand has ended some license agreements. Following the • Ecommerce success of the Burberry Body fragrance launch in 2012, • Concessions the brand has ended their contract with Interparfums • Outlets SA (appendix 5). This direct control over fragrance and beauty means that Burberry are now able to take advantage of the potential growth still available for this market, as the brand is still a relatively new entrant.

Licensing

Drawing back on licensees reduces the risk of the brand becoming oversaturated. Licensing accounted for only 6% of revenue in 2012, with 2/3 of this being from Japan. This suggests that there is less demand for licensed products, with the exception of Burberry timepieces, which again have a lot of growth potential as they become more aligned with and promoted by the brand.

• •

•

• Watches (Fossil) • Eyewear (Luxottica) • Licensees in Japan

In addition, the opening of further flagship stores built to the retail theatre concept in major cities (appendix 6), help support the franchisees in building customer brand perception and provide a framework for them to work to. This is known as flagships as a “conduit and support for business relationships.” Hines, T & Bruce, M (2008). In fitting with Moore et al. (2000)’s Four stages of fashion designer foreign market development (appendix 7), Burberry can develop their flagship concept further, which will be discussed later in this audit. -3-

Wholesale

Department stores Franchise Travel Retail

BRAND EVALUATION CORPORATE SOCIAL RESPONSIBILITY Burberry’s core values are to “Protect, Explore and Inspire”. This is reflected in the brand’s investment in British manufacturing and the Corporate Social Responsibility. Both initiatives link back to the brand’s heritage of providing trench coats for British explorers and soldiers to face tough weather conditions. Burberry’s core values extend to great lengths in the brand’s CSR. When considering Kotler & Lee’s (2005) 6 types of CSR initiatives (appendix 8), Burberry actively utilises each of the different categories to some extent. Initiative

Activities

Cause Related Marketing

Continual 1% group profit donated to charities under Burberry Foundation, so far £3.7m.

Cause Promotions

Created one-off pink trench coat to raise awareness for National Breast Cancer Awareness month in 2005. Opportunity to do more special edition products for charities.

Corporate Philanthropy

One-off donation of 3,000 coats to disadvantaged young people.

Community Volunteering & Corporate Social Marketing Burberry employees can allocate 4hrs a month to volunteer, links to large contribution to society involving others. Socially Responsible Business Practices (Appendix 9)

Include increasing primary transport to shipped by sea by 32%, so far recycled over 148 tonnes of raw waste, conducted over 750 audits of suppliers & factories.

Although the luxury brand are making many steps to a brighter future for local communities and sustainability of the planet, there are still further things the brand can do. One example is to be more transparent with the supply chain. As the production of cheap clothing among “Fast Fashion” retailers ceases to decrease, higher suspicions are raised regarding unethical practices in the manufacturing process. Despite this being more of an issue in the mass and high street markets, it does have some reflection upon luxury brands, too. In a focus group of luxury consumers conducted by the Ethical Fashion Forum during 2008-9 (appendix 10), research showed that they “don’t link high price designer goods with non-sweat shop labour, they are cynical of -4-

BRAND EVALUATION CORPORATE SOCIAL RESPONSIBILITY

design manufacture and assume items are made in sweat shops alongside cheap garments.” Furthermore, Tungate, M (2008) mentions- when speaking of Louis Vuitton opening 12 new factories between 2000 and 2005“All this is a refreshing change from the murky world of the sweatshops- but it is at the same time disheartening. If Vuitton and Hermes are to be believed, they are among the few globally renowned brands providing desirable objects without exploiting underpaid workers.” Burberry does not make an obvious point of where all of the clothes are manufactured (aside from the trench coats in UK), and doesn’t emphasise their ethical practices among suppliers. Although this could be because the brand feels it is not a major issue in the luxury market, this research shows that there are still pre-conceptions among consumers.

PYRAMID OF SOCIAL RESPONSIBILITIES (Adapted from Caroll, 1979, 1999)

Desired

Social Philantrhopic (charitable)

Desired/ expected Ethical (be ethical)

Required Legal (obey law) Economic

Economic (be profitable)

Required

Burberry are doing well to address the importance of CSR, however some critics are still sceptical of it, including Eamonn Butler, who stated: “Business of business is business. The business of civics is for government.” Musafer, S (2012). Although this may be true in some ways, it is currently not plausible for the government to set new extreme standards of doing business, e.g. making all dying processes sustainable or not using sweat shops at all. The more businesses that take responsibility to ensure ethical practices and more sustainable ways of making money, the more chance there is of the government setting new standards. However, the government could possibly make efforts at present by setting less difficult targets to large companies who can afford to make small changes, e.g. making 10% of clothing without using water. When considering the Pyramid of Social Responsibilities (image), larger companies and brands have no excuse to not make steps towards being more ethical and philanthropic. Corporate Social Responsibility is becoming more important in the minds of consumers, and although the importance of it may seem of a small scale so far, it will eventually be a necessity. The more transparency Burberry can convey, the further ahead of competition it will be. -5-

BRAND EVALUATION THE SUPPLY CHAIN

Burberry has internal and external manufacturers and sources locally and globally, minimizing “hidden” costs in the Iceberg theory (appendix 11). The brand have invested in UK manufacturing by setting up apprentice schemes in Castleford, UK, and Woodrow, which weaves the gabardine fabric used for trench coats. Choosing to manufacture most of the trench coats in the UK is a smart part of the supply chain strategy as this product holds the most strategic significance (appendix 12), and being local, the brand can maintain tighter control over lead times, quality, and react quickly to issues. A large majority of Burberry’s products are manufactured in Europe through third-party suppliers. The brand has a new regional distribution hub in Italy, “designed to bring significant speed, cost and energy efficiency benefits.” (company report) This efficient approach adds an extra layer of value to the customer in today’s high expectations. In a way, the statement “Supply chain strategies are either based on reducing cost and improve efficiencies or they focus on doing things differently to become more effective in serving the customer and creating added value” Hines & Bruce (2008) can not apply to today’s luxury brand, as Burberry incorporates both to create an exceptional experience to the customer, whilst maximising profits. Burberry’s focus on quality means that they try to work more closely with fewer suppliers. This also means that there can be economies of scale, leading to lower cost prices and higher margins. The brand source many lower cost items from China and have made a conscious decision to not use Bangladesh, as there is still too much uncertainty of ages of workers there. With the growth of the economy in China, the quality of product exported from there is now of a better quality than before.The brand’s developments of IT systems mean that they have much greater control over the entire supply chain. “Product development information systems are now able to track the progress of a line at all stages of the product from conception through till delivery.” Jackson & Shaw (2001)

ECOMMERCE

Burberry has established itself as a digital leader in the luxury fashion market. The brand’s ecommerce reinforces this through not only the efficiency of the shopping process, but incorporating visually appealing media to encourage the customer to spend more time there. One advantage Burberry has over some competition- and links to the brand’s values to be accessible- is that the website offers the entire range of products, unlike Prada’s, which still doesn’t offer Ready to Wear. Burberry’s ecommerce is consistent in the all-important mobile and tablet formats, with statistics showing that “69% of tablet owners make a purchase on their device every month.” Moth. D (2013) Each page encourages viral marketing via social media with clearly visible “share” options, and the amount of video content on the website further prompts consumers to show these new cultural experiences to others. The “click to chat” button which puts a customer through to an adviser online is a highly competitive feature Burberry has on its ecommerce channel, and helps to emphasise the exclusivity of the customer service.

FINANCIAL SUMMARY

FINANCIAL TIMELINE 2012

£408m revnue

retail £280m +14%

Ahead of 2nd quarter

Retail sales “unchanged year on year”.

Profits warning!

1st half up 8%

JULY 2012

OCT 2012

SEPT 2012 3rd quarter up 4%

retail £464m

£883m revenue

3rd Q £613m revnue

£1,116m revenue

Retail £577m +10%

2nd half up 9% retail £840m

Europe rev flat year on year

JAN 2013 APRIL 2013

Total revenue £1,857m Flat year on year sales in Europe over 3 months before Christmas suggests the market needs attention

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wholesale flat year on year £100m

REVENUE BY REGION 2012

Americas 24% revenue 5% growth

Europe 33% revenue 8% growth

Rest of world 7% revenue 14% growth

Asia 36% revenue 11% growth

Revenue by channel 2012 Retail 75%

Wholesale 20%

Retail accounted for 75% revenue by end of 2012 Wholesale decreasing to 20% down from 26%

Licensing 5%

-8-

Licensing also down from 6% as brand ends contract with Interparfums SA

Revenue by product division 2012 Menswear received significant growth and has further potential

Womenswear 32%

Accessories 39%

Childrens clothing can also be expanded on, particularly in BRIC countries

Childrens 4%

Menswear 25%

Accessories grew well, demand can be increased through price increase and less supply- becoming slightly too accessible

Burberry positively reported a 24% growth in revenue, with 2012’s being £1,857m, compared to 2011’s £1,501m. However, 2011’s growth was 27%, and therefore although the brand has increased revenue, the level of growth is declining. This suggests that Burberry’s point on the Retail Life Cycle (appendix 13) is very much nearing the maturity stage. Profits have been sporadic in the past financial year. September 2012 marked a profits warning for the brand, as they reported ten consecutive weeks of flat year-on-year sales. As well as decreasing share value and overall brand value by nearly £1.3bn (Telegraph), this sparked an overall drop in value for the whole luxury fashion market. However, 1 month later, the brand reported 4% growth for the 3 weeks preceding the warning. The inconsistent nature of Burberry’s profits in these months have continued early this year, and are indicative of the overall spending habits of the consumer in the luxury market at present, as well as the economic slowdown in China. “Stacey Cartwright, finance director, blamed the deterioration on global macroeconomic conditions and said it was “broadbase”.” Ruddick. G (2012). The brand must try to keep a level of consistency in profits and in these slower months, push entry-level priced products such as fragrance, beauty and the Brit line. In addition, retail now accounts for 75% of overall revenue for the brand, with wholesale profits decreasing 5% in 2012. Burberry needs to look into which wholesale channels are underperforming, and cut less-profitable relationships. In turn, this would drive footfall to retail stores.

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PRODUCT RANGE AND POSITIONING

PRORSUM PRODUCT CATEGORIES Trench Coats 25

Dresses

Coats

Shirts

Leather & Shearling

Bodywear

Capes

Knitwear

Jackets

T Shirts

Tailoring

Skirts & Trousers

Across all three lines, Burberry stays true to core values and product by offering a high amount of trench coat options. Although Prorsum is the most “high end” of the three sub brands, the starting price point is still accessible to a customer who might purchase more clothing from the Brit line. This is a good technique for retaining repeat custom and building loyalty among younger consumers of the brand, who aspire to one day purchase more from Prorsum.

Starting price point is £195 for a T shirt, highest is £22,000 for a Peacock feathered trench coat.

Alternatively the Prorsum customer might buy more from that line, however would turn to London for work wear and jeans, as although it is lower, the price is still indicative of premium quality. The product categories fit the different sub brands well, for example Brit offers the most denim and knitwear, whereas Prorsum offers more skirts, dresses and trench coats. The width and depth across the ranges is wide and deep, with most styles being offered in at least 2 different colour options/ materials.

LONDON PRODUCT CATEGORIES Trench Coats 36

Dresses

Coats

Shirts

Leather & Shearling

Knitwear

Quilts & Puffers

Skirts & Trousers

Jackets

Denim

Tailoring

Starting price point is £195 for a pair of jeans, highest is £9,000 for a Python trench coat.

This analysis suggests that opportunity could lie in developing a maternity line. In order to differentiate from other brands and gain a further competitive edge, this maternity line could perhaps be part of the London range only, and offer a tailored quality with a focus on the wearer looking sophisticated and professional, as well as flattered.

As denim has become more popular in the luxury market, with innovation in not just design but materials and finishes, there could be further opportunity for Burberry to expand on the current jeans offering, perhaps with a specific luxury denim range outside of all three sub brands, which ranges in price from the £195 to even £10,000+ mark. This wide price range would fit with the current focus on accessibility for all customers among all brands.

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PRODUCT RANGE AND POSITIONING

Through comparing Like-for-like of core products (appendices 14 &15), Burberry’s positioning among the luxury market is very competitive, when considering price and quality. What Burberry do not have however among accessories, other than the iconic check prints, is one classic style with an iconic name, which is repeated each season in new colours. Although there are many different ranges including The Blaze and Orchard, there isn’t one truly iconic one, such as Louis Vuitton’s Speedy or the Hermes Birkin. Burberry could develop on the Blaze each season to achieve this and gain further market share among accessories. The wide range of accessories caters to Burberry’s varied consumer type. Loyal customers who have been consumers of the brand for many years may favour the classic check, as this is still what they associate the brand with, and is what they like the brand for. The fashion-aware consumer will want new trends and colours, and therefore would go for Prorsum, maybe “The Blaze”, the statement bag for this season. Burberry’s digital range of accessories, including smart phone and iPad cases fits with the brand’s focus on technology. In the bag section, the consumer could easily be overwhelmed by the sheer amount of options and choices, Burberry could refine their bag offering slightly in areas such as the various checks, to offer purely bestselling ones.

BRIT PRODUCT CATEGORIES Trench Coats

Dresses

Coats

Denim Flared Fit

Leather & Shearling

Denim Bootcut Fit

Quilts & Puffers

Denim Skinny Fit

Jackets

Denim Slim Fit

Knitwear

Denim Straight Fit

Shirts

Denim Cropped

T Shirts

Denim Shorts

Polo Shirts

Skirts & Trousers

Long Sleeve Tops

Starting price point is £85 for a top, highest is £1595 for Shearling lined trench coat.

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High

Price

Low

Fashionability

Justification Hermes represents a significant threat to Burberry, being a high luxury brand which has kept high sales when Burberry and Gucci’s have dropped. Gucci is a big threat as it is currently doing a lot in the way of promotion, product and celebrity association, and has also recently launched the Gucci museo. Prada are also doing a lot to reinforce the brand’s culture and have had positive attention from catwalk shows. Although Ralph Lauren are not as popular or fashionable as Burberry, they could be a small threat through launching the “Ralph Lauren Korea” collection.

Barbour

Banana Republic

Ralph Lauren Emporio Armani

Hermes

Figure 1: Positioning Map of Competitors

Louis Vuitton

Burberry

Gucci

High

Prada

MARKETING ENVIRONMENT

Taxation increase from £32011

High earners wanting investment pieces

Democratization of luxury- lower income markets gaining access to luxury product via collaborations and also credit availability

Increasing retail theatre expansion & scale

People spending money on eating out and short holiday breaks

Luxury competitors offering made-to-measure product

Luxury market predicted growth until 2015

• Brand experiencing slower growth year-on-year and some periods of flat sales • Have just ended license agreement with Interparfums SA and now has direct Becoming control over fragrance and beauty products Over-whelmmore associ• New chief operating officer has been ing nature of ated with arts appointed to oversee the change from license technology & culture to retail • Finance director Stacey Cartwright has resigned and will leave in the Summer- decreasing shares by 6.5% to £13.37 • Brand is launching many new flagship stores in major cities across the globe including emerging markets Producing • Will be opening a second headmore cinequarters building in late 2013 matic brand films Economic growth slowing in China and politcal unFocus on certainty exceptional service

Keeping fit is of high importance

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MARKETING ENVIRONMENT

Tax rates 2013/2014 Earning (per year taing away personal allowance amount from earning)

Tax rate 2013-2014

Under personal allowance amount

No tax is taken

£0-£32,010

20%

£32,011 - £150,000

40%

over £150,000

45%

THE ECONOMY The luxury fashion market is predicted to continue growing until at least 2015. However, other economic factors, such as the increase in taxation rates on incomes from £32,011 in the UK, will alter the way in which Burberry’s target consumer will spend their money. High-earners will seek long-lasting investment pieces. Recently the luxury sector has experienced a drop in sales, particularly due to the economic growth of China slowing down, and continued economic uncertainty makes even wealthy people more cautious. A BESPOKE EXPERIENCE Luxury customers are demanding a more bespoke experience of shopping. When speaking about this expanding trend, Kay, K (2013) mentions, “those savvy shoppers who are spending their money on unique, made-to-measure pieces are part of what is being coined “the new luxury”.” This made-to-measure service is in a way, a step above the standard luxury purchase. As luxury brands are now accessible to lower-income customers, the bespoke services (which sit somewhere in between ready-to-wear and couture levels), are a way for the wealthier customers to feel that through their luxury purchase, they are still gaining a significant level of exclusivity. The democratization of luxury fashion is a topic among the industry being widely discussed. The collaborations between high street and designer brands have, as intended, widened brand awareness and accessibility to luxury names. The licensing of big brand names, including Burberry and Gucci, and the introduction of lower-price architecture (appendix 17) sub-brands, have resulted in lower-income consumers being able to purchase some sort of piece of the brand. Choufan, L (2013) states, “In recent years, fashion discourse has, to a large extent, become a discourse of rights. The democratic quality associated with the renowned fashion collaboration concepts reinforces an important outlook that has developed in the current era: the masses’ right to consumer elite fashion; the right of the less-fortunate to partake in this ample goodness, usually reserved for those with means. As citizens of the same society, shouldn’t the same opportunities be available to us all?”

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MARKETING ENVIRONMENT

Selfridges has caught on to this growing trend and has employed bespoke designer, Emilia Wickstead, to provide made-to-measure services for their luxury customers. Louis Vuitton are also focussing on retaining their most wealthy customers, “According to the Financial Times, Vuitton is already making an effort by slowing Chinese expansion in favor of making their existing stores even more luxurious with VIP rooms and personalization. “You need the very unique pieces, not just logo,” said PPR CEO Francois-Henri Pinault…It seems safe to say that in coming seasons, luxury consumers can expect more personal attention and expensive, limited-edition items.” Mau, D (2012) Burberry have also pulled into this with their “Bespoke” trench coat service, however this can now be expanded on. A BETTER STATE OF WELL-BEING As more technology is invented, the luxury customer- although being aware that they do need technology for their lifestyles- is seeking other ways to spend spare time, and to find a state of well-being. Fitness is a main priority now for a majority of people, in particular those who are successful and wealthy. As well as retail spaces, gyms targeting the higher-end consumer are becoming more conceptual. For example, Grace gym in Belgravia, London, is a women-only gym, which includes a library, screening room and restaurant. This market is spending money on short holiday breaks and eating out. However, they are choosing to find small, new places with unique features to dine at, rather than larger chains. This trend for quirky bistros and restaurants is particularly prominent around city centres, for example, the Brunswick House Café in London.

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MARKETING ENVIRONMENT

INTERNATIONALIZATION Globalisation has made luxury brands accessible to many different countries. Out of all product categories, fashion retailers have so far been the most successful in expanding abroad, due to a demand created through branding. As Hines & Bruce (2008) state, they are “Fashion retailer super-brands whose image positioning makes them appealing to customers across the globe, regardless of their cultural background and ethnic origin.” There are many factors that enable the internationalization of fashion retailing to be done so efficiently (Dawson, 1993 table of factors).

Factors • • • • •

Small format requiring limited capital and management set-up costs Ease of entry and exit compared to manufacturing Single brand format enables internationalization More suited to franchising than food formats Economies of replication

Burberry opened its first store abroad in Paris in 1906, and has since remained competitive through international expansion, including in emerging markets such as Brazil and India, opening flagship retail theatres in major cities, and through joint venture franchising in new markets. In terms of Darwin’s Natural Selection theory in retailing, the brand have adapted to changing environments and push factors such as the recession quickly and ahead of many competitors. Salmon and Tordjman (1989) identified three main strategic approaches to retailer internationalization (appendix 18). However, these three models are perhaps too broad for today’s retailing environments. Burberry’s strategy is a mix between global and multinational strategies; the brand enters these markets on the basis of being a luxury brand with British heritage and offers more or less the same product mix to each market, however adapts its promotions and retail theatres slightly to meet the desires and cultural expectations of different consumers. For example, bringing the Art of the Trench event to the store launch in Sao Paolo, Brazil, and using Chinese micro-blogging site, Sana Weibo.

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MARKETING ENVIRONMENT

As stated in Hines and Bruce (2008), “Dawson (1993) argues that there is a case to be made which sees globalization and multinationalization not as two discrete and mutually exclusive approaches to transitional expansion, but instead as a continuum which makes the extent to which a fashion retailer’s proposition is both capable and required to adapt to the needs of the foreign market. The continuum extends between the extremes of a standard global identity and a locally tailored one, and where a retailer is positioned on this scale is dependent upon the nature and importance of the retailer as a distinct brand entity, both at corporate and product level.” Internationalisation has also resulted in the rise of flagship stores in major cities, and has seen the role and function of them change drastically.

TECHNOLOGICAL ADVANCES Technology continues to have significant effect on the future of retailing and how consumers are buying. As well as bringing iPads and huge projection screens into store spaces, brands are going one step further to emphasise their digital standing among competitors. Burberry used iPads to allow their customers to purchase straight from the runway as the latest season show was going on, and Diane Von Furstenberg collaborated with Google Glass for her S/S 2013 show. It is not enough for luxury fashion brands to just have a user-friendly website, consumers are constantly hungry for new inventions and want apps, m-commerce and forward-thinking projects.

“Luxury fashion brands are opening more flagships in the world’s major cities as a way to strengthen and maintain control of their image, to shape it in the eyes of consumers, to promote an identity that enhances the brand, and to provide customers with an enjoyable experience on both a personal and interpersonal level in a branded environment. Increasingly these imperatives culminate not only in the valuable symbolic currency that luxury stores generate but in significant financial returns which we term as functional goals. In this interest we see luxury brands forging new ties with artists, designers and architects to create ever more impressive structures that will not only speak to the brand’s identity and showcase its products but will draw more customers to the stores who will make purchases of both higher priced and “entry-level” merchandise.” Manlow, V & Nobbs, K (2013) The changing nature of the retail store is a huge trend which Burberry is already addressing. In addition to flagship stores becoming “emotional centres of gravity for the brand”, Stephens, D (2013), goes further with his predictions of the future of the retail store and malls: “Leases will shorten, new retail brands will evolve more quickly, old ones will die sooner and pop-up installations will rotate through the space. Change will be continual. The mall manager’s role will become that of editor and curator as the mall becomes a revolving door for new brands and concepts, in a relentless effort to captivate consumers.”

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CHALLENGES AND OPPORTUNITIES

Through analysis of the current marketing environment and strategies of the brand (appendix 19), it is evident Burberry will face challenges in coming years, however these also bring a lot of opportunities. This section covers a review of these and follows with a strategic plan to overcome and pursue them. BRAND UBIQUITY AND ECONOMIC UNCERTAINTY As mentioned in the marketing analysis, one major challenge Burberry is starting to face- and will increasingly face as the brand expands- is the ubiquity of the name and products. In addition, after the booming success in profitsmajorly due to economic growth in China- Burberry face lower footfall in China as the country’s economic growth slows down. Asian consumers have also become quickly educated on fashion and as Burberry is so well-known there now, the spark has slightly faded, and they are seeking smaller, niche designers with a more limited product range. The brand must focus on developing product to bring back a luxurious edge for the high-end consumer, including an exclusive range for the Asian market. As well as this, the brand’s luxury status can be re-affirmed by developing the Bespoke service, and bringing a “made-to-measure” tailoring service into flagship stores. Customization is said to be the future of luxury, so Burberry must address this further. THREATS OF NEW ENTRANTS AND COMPETITORS (PORTER’S 5 FORCES (APPENDIX 20) As well as leveraging the brand’s luxury status through products and services, Burberry need to be aware of competition at the lower-end of the market, particularly in denim and the highly competitive fragrance markets. Being accessible to this lower-end of consumers means that the brand is at risk of being disregarded for a cheaper alternative or slightly better quality. In order to remain competitive, Burberry can use promotions and new stores to increase awareness and encourage further sales. Small, less expensive stores holding only fragrance, beauty, digital accessories and watches can be brought in, to encourage smaller spending customers to visit stores, enjoy the Burberry experience, and still actually buy something. This could initially be launched via franchise to provide less financial risk to the brand, and in key city areas.

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CHALLENGES AND OPPORTUNITIES

At times when footfall and profits have previously been flat or much less, pop up stores could be put in to popular areas such as Covent Garden, which sell only Brit brand products, or even one specific best-selling category. For example, premium denim and jeans in general are a huge trend this season, and Burberry could take advantage of this by doing an 8 week pop-up as a way to boost figures without too much operational cost. FURTHER SCRUTINY ON BRANDS TO BE ETHICAL As discussed in the CSR evaluation and marketing environment, the importance of CSR, being ethical and sustainable, is only going to become greater. The recent Bangladesh factory collapse has reignited consumers’ awareness of the topic. With a new efficient distribution centre in Italy, Burberry have potential to increase manufacturing in Britain without too much increase in transporting costs, to possibly include other outer-wear, and quicker-to-produce items. This increase in ethical UK manufacturing would put Burberry further in a good light for CSR, whilst providing more jobs in Britain, and bringing attentions back to the European market. Burberry has opportunity to start using more sustainable fabrics in their products, and in doing so could gain a huge competitive edge and set a new bar for the luxury market to reach. It could also bring in new customers who are after luxury but are concerned for the welfare of the planet. TECHNOLOGY’S QUICK ADVANCES Although Burberry are seen as digital marketing leaders, the quick rate at which technology is developing means the brand needs to work harder to hold on to this position. This is evident in Diane Von Furstenberg’s Google Glass collaboration, and Ralph Lauren’s 4D projection promotion. Creative director Christopher Bailey has long praised Apple products, so Burberry could consider doing a promotional collaboration with Apple to further cement the brand’s digital standing, as well as gain a highly profitable relationship. The brand now has the staff and resources to develop their own new technologies, or be a pioneer for the upcoming advances in augmented reality.

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RECOMMENDED STRATEGIES

STRATEGY Develop product mix to re-affirm Burberry’s luxury status.

OBJECTIVES 1: Launch limited exclusive collection to Chinese market to retain customers and leverage levels of exclusivity. 2: Bring in made-to-measure tailoring service for men and women to flagship stores to add extra layer of luxury for high-end consumers. 3: Expand Bespoke to include more bestselling outerwear and leather goods. 4: Increase price and reduce production of bestselling, high-priced goods to increase demand.

Extend marketing of lower-price products to boost sales and retain customers.

1: Launch new small stores selling fragrance, beauty, digital accessories, wallets and watches in key city hotspots, initially through carefully controlled franchise agreements, to compete with lower end competition. 2: Roll out 8-week pop up stores in low-profits months to adhere to current micro trends, using only one product/ sub-brand. E.g. Brit denim pop up store in Covent Garden & Times Square. 3: Boost awareness and desire of Brit label via social media and advertising online. 1: Increase manufacturing in UK on other outer-wear and quick-to-produce products to boost UK economy and jobs, and sales in European market. 2: Conduct further, thorough audits of external factories, and aim to be more transparent in supply chain. E.g. videos tastefully made to show working conditions in factories for Burberry Experience on website. 3: Incorporate more sustainable, renewable and organic fabrics into products to gain competitive edge and potential new customers. 4: Collaborate with new charity and launch one-off limited and highly-priced edition of bestselling product e.g. new Blaze bag. 1: Create iPhone app and iPad magazine (both shoppable) to increase customer interaction and cultural authority. 2: Collaborate with Apple or Samsung on promotional project to reinforce brand’s digital status. 3: Use resources to develop new technology e.g. augmented reality ahead of competition.

Expand on Burberry’s CSR initiatives to gain competitive edge in luxury market and be forward-thinking.

Further develop technological product and digital efforts to maintain brand’s position.

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RECOMMENDATIONS AND ENHANCEMENTS

When considering the four stages of international development as mentioned earlier, Burberry can now consider opening diffusion brand flagships in capital cities, as well as stores for purely accessories/ fragrance/ watches. These flagships for more specific products will reinforce the brandâ&#x20AC;&#x2122;s luxury status and will also encourage more lower-end consumers to come into stores, thus stimulating sales, particularly in Europe, where year-on-year was flat. The stores would be smaller but have the same luxurious environment, providing an intimate experience for the customer. Physical retail space is downsizing, and Burberry can adapt to this, without taking the elements of luxury. Taking into account store size and the small team of employees needed, overheads would be considerably less than the usual flagship. Customer interaction needs to be increased to encourage more brand loyalty. Loyalty is one of the hardest things luxury global brands can gauge with current consumer attitudes. The iPhone app and iPad magazine will encourage this through including competitions, polls and sharing options to social media. These will also help Burberryâ&#x20AC;&#x2122;s digital position and increase opportunities for viral marketing. In addition to the four main strategies, Burberry can increase their luxury heritage authority internationally by introducing a brand museum, such as Gucci and Salvatore Ferragamo has done, and possibly a brand film. This would again re-iterate the brandâ&#x20AC;&#x2122;s longstanding appeal, boost desire from existing customers, and will potentially attract new ones. Overall the most important thing currently for Burberry is to gain as much edge over competition as possible in the luxury market, as it is seemingly losing its appeal, particularly to very wealthy (and the most important) customers. Building on relationships with existing customers, raising brand awareness and developing products to be unique and a step above the rest is what will help Burberry succeed in the future.

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BIBLIOGRAPHY BOOKS Cox. R & Brittain. P (2004) Retailing: An Introduction. UK. Financial Times/ Prentice Hall/ Pearson Education. Fernie. J, Fernie. S & Moore. C (2003) Principles of Retailing. UK. Butterworth-Heinemann. Jackson. T & Shaw. D (2001) Mastering Fashion Buying and Merchandise Management. UK. Palgrave Macmillan. Hines. T & Bruce. M (2007) Fashion Marketing: Contemporary Issues. 2nd Edition. UK. Routledge. Tungate. M (2008) Fashion Brands: Branding Style from Armani to Zara. UK. Kogan Page. Morgan. T (2008) Visual Merchandising: Windows and In-Store Displays of Retail. UK. Laurence King. Posner. H (2011) Marketing Fashion. UK. Laurence King. ONLINE ARTICLES Mau. D (2012) Fashionista. USA. Available from: http://fashionista.com/2012/12/burberry-louis-vuitton-sales-falter-as-anaylsts-worry-luxury-labels-are-becoming-too-ubiquitous/ [Accessed: 18/03/2013] Musafer. S (2012) BBC News. BBC. UK. Available from: http://www.bbc.co.uk/news/business-19876138 [Accessed: 27/04/2013] Ruddick. G (2012) Telegraph. Telegraph Media Group Ltd. UK. Available from: http://www.telegraph.co.uk/ finance/newsbysector/epic/brby/9534820/Burberry-has-1bn-wiped-from-value-after-profits-warning.html [Accessed: 01/05/2013] Kay. K (2013) The Guardian. Guardian News and Media Ltd. UK. Available from: http://www.guardian.co.uk/fashion/2013/mar/09/bespoke-clothes-take-over-fashion [Accessed: 18/03/2013] Choufan. L (2013) Business of Fashion. The Business of Fashion Ltd. UK. Available from: http://www.businessoffashion.com/2013/03/op-ed-fashions-democratic-disease.html [Accessed: 02/04/2013] Stephens. D (2013) Retail Prophet. Retail Prophet Inc. USA. Available from: http://www.retailprophet.com/blog/ the-future-of-retail/ [Accessed: 02/04/2013] E-JOURNAL ARTICLES Manlow. V & Nobbs. K (2013) Form and function of luxury flagships: An international exploratory study of the meaning of the flagship store for managers and customers, Journal of Fashion Marketing & Management [Online] 17 (1) 49-64 Available from: http;//www.emeraldinsight.com WEBSITES www.uk.burberry.com www.businessoffashion.com www.wgsn.com www.stylesight.com MAGAZINES & TRADE JOURNALS Drapers Record Vogue Marketing Week

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Appendix 1: Burberry collection pyramid Taken from Business of Fashion

Coats, dresses and accessories

Peacock feather trench worn by Anna Wintour

Coats, trousers and accessories

Metallic rainbow palette S/S 13 trench coats

Trench coats, denim and tailoring

Classic cotton cream/ beige trench coat

Original across brand

Model for trench coat

A recent article on the Business of Fashion website (http://www.businessoffashion.com/2012/12/the-basicspart-5-design-and-development.html) talks about building a collection pyramid, when running a successful fashion business. At the bottom of the pyramid are the items which form the foundations of the brand and its associations. These items are essential to the product offering and do not change much each season. Items in the middle are basic shapes and silhouettes which are adapted each season through colour and fabrics. Top items are the statement pieces which draw more attention to the brand for creativity and design. These items tend to be featured in editorials and on celebrities, acting mainly as a publicity vehicle for the brand. Although Burberry does in a way fit to this model, it also does what not a lot of other brands do with its core product- the trench coat- in using it for all three sections of the pyramid. This adapted model is shown next to the original. Obviously, there are more specific adaptations to this original model through each sub-brand, however this is in a general context for the overall Burberry brand.

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Appendix 2: Price Strategy Low

Low

High

Economy

Penetration

Skimming

Premium

Burberry’s price strategy is Premium: high price and high quality, with a level of exclusivity. Burberry can price high due to the brand image and position in the market, particularly with Prorsum line. Like most fashion products, Burberry’s are elastic- there is less demand for the more expensive, and vice versa. However, with a luxury brand, price is less of an issue for the consumer. Burberry are unlikely to adopt any tactical pricing, as competition in the market is not dependant on price, however there can be a reverse of a New Lower Price, by which the brand silently increases the price of a particular product. This is evident from the annual 2012 report, which states “Average selling prices continued to increase due to product mix, pricing increases and better full price sell-through.” In this sense, this can also go against the elasticity- whereby often in luxury if there is a higher demand for the product, the price can be raised, as this is unlikely to be off-putting for the customer. These tactics will have a positive permanent impact on the gross margin.

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Appendix 3: Ansoff ’s Matrix Burberry’s current strategies Existing Products

New Products

Existing Markets

Consolidation or Market Penetration

Product Development

New Markets

Market Development

Product Diversification

Burberry’s current strategies mainly focus on both market penetrarion and market development, but also include some product development. The brand are currently aiming to capitalize on the Chinese market and are continuing to focus attentions on expanding there, and are also increasing prices of best selling products and producing less, to try and hold on to the luxury status. Brazil and America are also countries which are experiencing development through the opening of new stores. As well as penetrating existing markets, Burberry are also developing into new emerging markets including Saudi Arabia and South Africa. This is being done by opening new franchises, as well as buying out some older ones to turn into retail stores, and increase profits for the brand. Product development is also occurring with the expansion of men’s tailoring, a focus which links to the opening of a new mens store in Knightsbridge, and in general capitalizing on the potential growth the mens market currently holds.

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Burberry Prorsum The consumer of Prorsum is after investment pieces, but ones which are high-fashion and make a statement. The prorsum customer is a professional high-earner and may live in the city or suburbs, and enjoys socialising, dining out and is more than likely to spend a lot of time at work, or networking for her job. Being part of the Early Majority, the customer appreciates trends however wants a more toned down version of current fashions, which has a very good quality. The age bracket for this consumer is generally late 20â&#x20AC;&#x2122;s-mid 40â&#x20AC;&#x2122;s, particularly for higher-priced products. Someone slightly younger may purchase a top or pair of shoes to gain a piece of the high-end part of Burberry. This consumer is time-sparse and appreciates a high level of customer service, but also one which is efficient and non-wasteful of her time. She uses her smart phone and tablet for work and leisure, and will often purchase small pieces online for events or at last minute. Being well-educated in fashion and designers, the customer is likely to mix brands, and may also purchase from Prada and Gucci, but also smaller names such as Christopher Kane and Erdem. She may also buy basic tees and vests from Top Shop. Although mainly loyal to Prorsum, the consumer may go to the Brit line for jeans and knitwear.

Being a luxury global brand who has expanded to include 3 different sub-brands, alongside accessories and licensed products, the consumer market is diverse and spreads across different generations and genders. What links these consumers is a love for the brandâ&#x20AC;&#x2122;s values and heritage, the luxurious experience provided by the brand throughout its different distribution channels, and an appreciation for good quality product. The consumer also considers technology an intrinsic part of their lifestyles, and owns a smart phone, and is likely to also own a tablet. However, to gain a more specific insight into each type of consumer, a profile for shoppers for each subbrand can be identified.

BURBERRY CONSUMER PROFILES Appendix 4

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Burberry Brit The Burberry Brit consumer is the youngest of all three brands, with an age bracket of 18-30, part of Generation Y or Z. The Brit customer likes the brand for the youthful and edgy twist taken on the brand’s classic values, and is likely to purchase more casual versions of the trench coat, skinny jeans and t shirts. The consumer is a low-earner however one day aspires to shop regularly at Burberry for Prorsum pieces, and may be on the first steps of their career ladders. They are well-educated, and keep up-to-date with current fashion and cultural trends. They are more likely to be varying from the Early Adopter to Early Majority consumers, and go to Burberry Brit for high-quality basics to mix with more on-trend, high street pieces. The £195 pair of jeans they purchase may be the most expensive item they buy in a month, and for everything else they opt for the high street, shopping at Top shop, Zara and ASOS. They may also go to Banana Republic for trench coats and pieces which appear to be more luxurious in price, or Rag and Bone for similar style and priced jeans. The Brit consumer is also very technology-orientated and uses their smart phones regularly to maintain contact with friends and brands via social media.

Burberry London The Burberry London consumer isn’t so much interested in fashion trends and likes Burberry for its classic items such as the haymarket check prints, cream trench coats and simple black dresses. The London consumer’s age ranges from 35-60+, and they may live in the city or suburbs, but are also likely to have settled in more rural areas or home counties. The London customer could have been a loyal customer to the brand for at least 20 years and returns to Burberry for similar pieces they have favoured over this time. Alternatively they could be a working professional after high-quality tailored pieces which are more classic and long-lasting than the trend-led Prorsum range. They may purchase a few simple dresses for work in one shop, as they know they will last and be worn a lot. This consumer is less concerned with current cultural happenings and although uses smart phones and tablets, likes to switch off for a while outside of work. They are more likely to have families, and favour dining in and having friends over, rather than going out all of the time. The Burberry London customer may also shop at Stella McCartney and Ralph Lauren, as well as heritage-style brands like Barbour, for their country visits.

Appendix 5: Fragrance press release http://www.burberryplc.com/investor_relations 11 October 2012 Burberry Group plc Fragrance and beauty to be directly operated In order to capitalise on the significant opportunities available for the brand in fragrance and beauty, Burberry announces that it will directly operate these product categories following the end of its existing licence relationship with Interparfums SA. Fragrance and beauty will be run as Burberry’s fifth product division alongside accessories and womens, mens and childrens apparel. Burberry already leads all product design, packaging and marketing activities for fragrance and beauty. It will now take control of the relationship with sourcing, logistics and distribution partners worldwide, supported by Burberry’s existing IT, planning and central infrastructure and supplemented by a number of key senior hires with extensive functional expertise in these categories. To facilitate the transition, the licence relationship with Interparfums has been extended until 31 March 2013. Burberry will commence direct operations from 1 April 2013. Angela Ahrendts, Chief Executive Officer, commented: “Directly operating fragrance and beauty is in line with our strategy of taking greater control over our brand. There are significant opportunities to accelerate the growth of this business over time, leveraging our infrastructure and that of existing key suppliers and distributors. We are very excited about fragrance and beauty becoming an important fifth product division for Burberry, as we more closely align it with our core business and brand positioning.” Further details, including financial information, will be provided with Burberry’s interim results on 7 November 2012. As previously announced, Burberry will pay Euro181m in cash (exclusive of any receivables, inventories and other tangible assets) to Interparfums on 31 December 2012 for the ending of the licence relationship.

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Appendix 6: Burberry’s Retail Location Strategy After immediate success of the rollout of the new retail theatre flagship store concept in cities including London’s Regent Street store, Burberry are continuing to expand on their flagship offering. The strategy for Burberry’s flagship adheres to Christaller’s Central Place Theory (1930), in that they are placed in the most central locations and therefore guarantee the most foot fall. However, in order to gain custom from those who will not venture to the city, Burberry also place smaller stores in other areas, such as Westfields shopping centre. This is easily accessible to customers driving from the motorway, who may travel an hour or so’s journey to spend the day at the shopping centre. Smaller, more specific market-directed stores are also being opened in wealthy locations- including the new menswear store in Knightsbridge. This location strategy of both flagships and smaller stores means that Burberry is once again accessible to a wider market, and means the high-end luxury, big spending customers can choose to opt for a smaller, more personalised experience, should they not wish to come across any tourists in the flagships.

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Appendix 7: Moore et al. (2000) Four stages of fashion designer foreign market development

Stage 1- Launch couture/ RTW via wholesale in capital city department stores

Stage 2- Open couture/ RTW flagships in major capital cities

Stage 3- Open diffusion brand flagship stores in capital cities

Leading to extended wholesale of RTW in other major cities

Stage 4- Open diffusion stores in key provincial cities

Leading to maximise availability of diffusion brands via wholesale within extended major cities

Appendix 8: Kotler & Leeâ&#x20AC;&#x2122;s (2005) 6 Types of CSR Initiatives

1. Cause Promotions: Brands fund financially or draw awareness to a social cause. Could be a collaboration or stand alone promotion. 2. Cause Related Marketing: Brand commits to making financial donation to good cause- usually % of sales. Ongoing/ product limited edition. 3. Corporate Social Marketing: Brands engage in social marketing campaign to encourage a behaviour change in society. Different to Cause Promotions which only aim to raise awareness. 4.

Corporate Philanthropy: Company makes one-off donation to cause or charity.

5. Community Volunteering: Company encourages/ supports employees or partners to give up their time to support a good cause. 6. Socially Responsible Business Practices: Brands renew their processes to improve community well-being or to protect environment.

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Appendix 9: Burberry Global Environmental Policy (Taken from http://www.burberryplc.com/documents/corporate_ responsibility/Burberry_Global_Environmental_Policy.pdf) Globally Burberry will: x Set targets and objectives for the businesses in the above areas to drive a continuous improvement in our performance x Communicate our activities to all employees regularly and support and encourage employee involvement in environmental improvements x Educate our employees on the importance of this policy and provide them with the skills and support they need to implement it x Hold employees and senior management accountable for environmental performance x Meet the requirements of all relevant legislation Every part of Burberry’s worldwide operations is committed to our Environmental Charter. Each will: x Have a ‘sustainability leader’ x Measure its carbon and waste footprints x See waste as wasteful: cut it to a minimum and recycle all it can x Emit less carbon - per store, per site, per factory - each year x Use sustainability as a spur to constantly improve its processes Appendix 10: Focus group research taken from “Market for Sustainabile Fashion Briefing, Ethical Fashion Forum, 2011 Opportunities for ethical fashion vary across product value sectors During 2008-9 focus group research was carried out by the Ethical Fashion Forum into the opportunities for ethical fashion products in different market sectors. Groups of consumers from 3 target market sectors were randomly selected to take part: Group 1 regular Primark and/or Tesco shoppers – Budget market Group 2 regular All Saints and/or Whistles shoppers – Mid range market Group 3 regular Harvey Nichols and/or Browns shoppers – High end designer market Focus groups were conducted with an impartial, varied demographic of 21 consumers aged 20-44 Focus Group 3 comprised of participants who regularly shop at Harvey Nichols and/or Browns • These consumers enjoy the experience or “scene” of high end designer shopping and are unsure how ethical fashion would fit into this. They felt that ‘point of sale’ information, ethical sections and swing tags would not work with the generally minimalist branding. • Participants were split in opinion regarding whether they would be interested to learn more about how their clothes were made. They agreed that they would only be interested in the story if they liked the product first. • The research showed ostensibly conflicting views. Participants showed high levels of trust in their retailers and were more sceptical of the ethical fashion facts – they spoke of feelings of being “bombarded with propaganda” and a “worthy overload”… • … However these consumers don’t link high price designer goods with non-sweat shop labour, they are cynical of designer manufacture and assume items are made in sweatshops along side cheap garments. Participants weren’t bothered by this as long as the products have a designer label and are stylish. • Participants felt that the responsibility to improve practices lies with the retailers, producers and distributors rather than with the consumers. The availability of ethical fashion is poor; therefore they should not be made to feel guilty for what they do buy. - 31 -

Appendix 11: The iceberg theory of cost comparison Hines, T(1998)

Transparent cost comparison

Perceived cost saving gap

UK cost Non UK Water line

Non-transparent costs= transaction cost (Co-ordination cost and risk cost).

Procurement Management Time Plant Visits Correction costs Lost sales Lost flexibility Response time

UK Competitive advantage

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Appendix 12: Strategic sourcing and Supplier relationships Kent and Omar (2003)

Important but low-worth lines. Regular monitoring, but intervention by exception

High value strategically important lines. More open/ trusting/ long term supplier relationship.

High

Flexibility

Partnership/ Integration

Strategic importance Low intervention Process led

Low worth products, slower moving. Minimal focus. Low

Negotiate lower cost price High volume, high cash generators but commodity/ transferable products

Financial significance

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High

Appendix 13: Burberryâ&#x20AC;&#x2122;s position in Retail Life Cycle Adapted from Retailing: An Introduction (Cox & Brittain, 2004)

Innovation stage- New retailer will have fewer competitors, rapid growth in sales but low profitability due to start up costs. Growth phase- sales growth is still rapid and profitability is high due to the economies of scale now possible. However, competitors will spot this and begin to encroach on this market. Maturity- there are many competitors, sales growth has declined and profitability moderates. Final decline- Sales and profits fall and new, more innovatory retailers are developing and growing. Burberry are still at a stage of growth in the brandâ&#x20AC;&#x2122;s retail life cycle, however flat sales in Q2 suggest that the brand could be reaching the maturity stage, as newer entrants and smaller designers bring more niche and unique product, without such a widely accessible brand name. Sales and profits are still growing, however not at such a rate as before. However, Burberry is still expanding and can strengthen the brandâ&#x20AC;&#x2122;s prominence in these emerging markets through tailored promotion and even product offering to the particular country. Although there are a lot of competitors now to the brand, they can still maintain an edge through further digital innovations. Other opportunities include menswear tailoring and childrens wear.

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Appendix 14: Like For Like Comparison: Trench coat

Product: Classic Trench Price Coat

Material

Extra features

Burberry

£1,095

100% cotton

Burberry check lining, Made in UK, references original Burberry coat

Gucci

£845

85% nylon 15% elastane Waterproof, lightweight, double-breasted, Made in Italy

Paul Smith

£688

Woven: 62% cotton 28% Showerproof. Partially linen 10% silk lined with floral print fabric. Made in Italy.

Barbour

£219.95

100% polyester with PU Tartan check lining lining

Banana Republic

£125

100% cotton

Double breasted and fully-lined

This LFL comparison of the trench coat emphasises further why it is Burberry’s core product. One massive unique selling point for the brand is that the coat is manufactured in the UK, in Burberry’s own factory. No other luxury brand can offer this, particularly as the original gabardine material is also made in Britain. This genuine Made in Britain label and the manufacturing quality, along with the brand name, justifies the high price. The material Gucci have used for their basic trench coat is not as good as Burberry’s, which could be a deciding factor for a customer in picking between the two brands. A consumer looking for the same aesthetic as Burberry’s, but not wanting to spend a lot of money, would be likely to go for Banana Republic’s option. The £125 price tag for a piece which will be worn a lot and looks more expensive is very competitive, especially considering Banana Republic are often deemed at the higher end of the mid-market. The 100% cotton material (same as Burberry’s) is also indicative of good quality for a good price. Someone looking for the “British” factor but is not able to afford the Burberry may opt for the Barbour version, as they have similar underlying brand values. However, the quality and material is not great, especially seeing as the lining is “PU”, a cheaper knock-off of leather. Overall, Burberry remains extremely competitive within the luxury market for this product in terms of quality and brand.

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Appendix 15: Like For Like Comparison: Hand bag

Product: Hand bag

Price

Material

Extra features

Burberry (The Blaze)

£1,195

68% viscose 32% silk with leather trim

Hand stitched using “double duchess” satin, made in Italy. Inc leather covered lock and key.

Prada (Top handle)

£1,150

Saffiano calf leather

Prada logo lining and branding

Louis Vuitton (Speedy) £1,550

Canvas with leather trim Bottom studs. Removaand gold brass buckles ble and adjustable leather strap.

Gucci (Bamboo shopper £1,230 tote)

Dark red leather with natural linen lining

Double bamboo handles. Detachable and adjustable leather strap.Made in Italy.

From comparing these four brands, it is evident that accessories have developed to become an extremely important product for defining a brand and its status. Although Burberry are more well-known globally for the trench coats and check pattern, the brand do well to offer a statement style each season, to remain competitive over these other brands. A luxury consumer may well aspire to own a classic Prada bag with the defining logo, or a Louis Vuitton Speedy with the eponymous LV print. However, Burberry offer an on-trend and high quality product, hugely promoted through fashion week, at a price slightly higher than Prada’s classic styles and lower than a Louis Vuitton. Positioning the brand in between the two provides an advantage, as it is a compromise for the consumer. Each bag hints back to the heritage of the brands, with Burberry’s they have added the lock and key to hint back to classic luggage styles, but in keeping with the brand, have made the colours and materials fashion-forward in “a celebration of seduction and feminity”. Gucci’s bamboo bag fits with the brand’s use of bamboo in collections, and uses high quality materials.

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Appendix 16: PEST analysis

Political • Uncertainty in China- country is preparing for leadership change over, and this means current leader has less power. The future leader will need to “act conservatively so as to avoid alienating those who will determine their political future.” http://contextchina.com/2012/09/political-uncertainty-in-china-is-weakening-economic-growth/ • Japan’s future looks bleak both economically and politically- no change in state of country for 20 years, no attempts at spreading of wealth beyond richest leaders. Economic • China’s economic growth has decreased to its slowest rates since global financial crisis- linked to global economy- less demand for manufacturing • Current global economy still worrying and consistently under threat of another crisis • Uncertainty means even people with a lot of money are still more cautious about extravagant purchases- from what they hear and read in media Social • People communication more via social media and more open about what they are doing/ seeing/ buying through sharing • Keeping fit and actively seeking more fulfilling lifestyles outside of just technology • Eating out for leisure and finding more niche boutique style restaurants- less interest in corporate chains • Have more awareness and care for others and charities- less selfish Technology • Majority of population now own smart phones- “Smartphone ownership in the UK will hit 75 per cent next year, according to Guy Phillipson, CEO of the IAB UK. Read more at http://mobilemarketingmagazine.com/content/uk-smartphone-ownership-hit-75-cent2013#M4cO3GD03TrUqq9X.99” • Online retail experiencing further growth, global b2c ecommerce market was valued at €825bn in 2012. (IMRG) http://www.imrg.org/IMRGWebSite/user/pages/homepage.aspx • Consumers wanting seamless integration between web browser, apps and devices

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Appendix 17: Burberry price architecture

Top price product £12-22,000 Statement pieces for catwalk e.g. £22k peacock trench

Premium price: £1,000- £10,000dresses, trench coats, leather goods

Mid Price: £395-£995- tops, tailoring, skirts, basic dresses, jackets

Low Price: £27-£395- fragrance, beauty, jeans, t-shirts, small accessories

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Appendix 18: Three strategies for retailer internationalization. Salmon and Tordjman (1989) International Investment • Involves transfer of capital from one country to another, with the aim of acquiring part-share or total shares in another operating company. E.g. LVMH group • Gain rapid market share within markets whose organic development of a chain of outlets would involve high risk and high cost Global Strategy • Countries which have consumer groups with shared lifestyle characteristics and purchase requirements, independent of their place of residence • A faithful replication of a trading concept abroad- same product range, communications methods, corporate identity, service and price levels within all stores, regardless of geographical location • Retailers who typically have a defined image and market positioning e.g. Gucci, Prada, Kenzo • Interplay between store environments and products on sale are integral to the success of this retailer • Vulnerable to competitor attack or changes in consumer attitudes. Inflexible to local market needs Multinational Strategy • Seeks to preserve a basic trading concept or image across a range of geographical markets, but adapt the formula to fit local market conditions and expectations of local customers • Company operates some basic strategy but marketing mix is adapted to suit local market conditions • Expected to grow in food sector and other categories that are less subject to abrupt changes in consumer tastes and lifestyle features

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Appendix 19: Burberry SWOT analysis

Strengths • Retail network is large- wholesale, licensing, franchise and retail • Brand has global presence and still expanding • Established as leading luxury brand for digital and retail innovation • Associated with many celebrities on an international level- fashion week show is now one of most prestigious and sought-after • Strong core values and product- trench coat • Entire range of clothing available online unlike some competitors

Weaknesses Weaknesses • Accessible to very wide market now, even high-street • Not consistent in profits • No couture presence • Weak turnover in certain months and flat year-on-year sales

Opportunities • Can develop bespoke service to other core products e.g. denim trend, leather goods • Add sustainable qualities to product offering and emphasise on UK manufacturing • Could create small pop-up sections for ontrend eateries in flagship stores globally- each local businesses to that particular city. • Intensify non-apparel- now brand has direct control over fragrance and beauty, grow on this and expand, as the brand is still a relatively new entrant to this market • Expand on in-house museum- bring it out further to public to emphasise brand heritage • Collaborations to further digital standing

Threats • In relation to internationalisation, need to be careful to not expand too quickly and vastly- threat to return on investment • Again with internationalisation, need to focus on each country and city and make sure the targeting is truly segmented, and differentiated towards culture • Customers can easily switch to competitors if one introduces newer service/ better quality product • Economic uncertainty and political uncertainty- particularly in China • High street and premium brands often copy classic products and some can offer good quality at much lower price e.g. Whistles, Cos, Banana Republic • New entrants in international markets expe-

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Appendix 20: Ansoff â&#x20AC;&#x2122;s matrix Burberryâ&#x20AC;&#x2122;s future opportunities

Existing Products

New Products

Existing Markets

Consolidation or Market Pen- Product Development etration

New Markets

Market Development

Product Diversification

Burberryâ&#x20AC;&#x2122;s near-future opportunities mainly lie in market penetration, market development and product development, however also could go into product diversification as well. Market Penetration As Burberry are in so many different markets now, there is a lot of opportunity to capitalize on them. Now that Burberry are firmly in the Asian market, the brand can now consider creating a specific product range to suit culutral tastes and heritage. They can also consider developing on swimwear and beach wear for hotter climates such as Brazil. Penetration through improving the product mix to suit individual markets will not only increase average spend from existing customers, but will also be great promotion and a way to increase number of customers through new brand awareness. Market development Although Burberry are continuing to expand their store portfolio into new markets, there are still areas with huge potential growth. These include Russia, South Africa and the more cosmopolitan areas of India. Product development Burberry are currently targetting the mens market through pushing mens tailoring, and this can soon be done to expand further on the womens market. As the luxury consumer market begins to demand more made-to-measure and personalised clothing, Burberry can cash in on offering the same sort of service in store. There is also room to expand on the Bespoke trench coat service with other best-selling products including accessories. Diversification Although Burberry offer a small range of blankets, there is room to move further into the homeware market. Possibly in about 2 years, the brand could launch a small line of bedding, cushions and other home accessories to fully cash in on a market holding potential. It would need to be done tastefully, and therefore licensing may not be an option for the brand to have direct control over the product. Or, it could be a base of a collaboration with one specific homeware manufacturer who is used to producing products for high-end homeware sellers, and can adhere to highly set standards from Burberry. The distribution of this would need to be of a small scale and limited amount for this to maintain a luxury status.

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Appendix 21: Louis Vuitton SWOT analysis

Strengths • Established brand with 150 years heritage • Acclaimed creative director with experienceMarc Jacobs • Trademark pattern and logo globally recognised • Large celebrity following • Fashion week shows always highly anticipated by editors and buyers • Collaborations with renowned artists and cultural icons • CSR very well-promoted and defined

Weaknesses • High level of counterfeits of bags • Monogram print ubiquitous • For global consumer outside of fashion lovers, the brand is still only really associated with accessories

Opportunities • Exhibition/ museum featuring past collaborative projects • Incorporate “digital discoveries” project into stores • Establish a small couture house/ range

Threats • High competition- and no haute couture range to further differentiate brand over other design houses • Imitations of products can damage reputation • As consumers become more culturally educated across globe they seek more unique less wellknown designer brands- not just focussed on logo

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Licensing & Franchising • Risk of being too accessible through too much overexposure • Ending some license agreements to retain more control • Buy out more franchise stores in emerging markets and BRIC countries to have as asset & more profit

Internationalization • Burberry enter markets mainly on the basis of being luxury heritage brandcould focus on targetting locally to specific regions through product strategy &promotion

Retail Location Strategy • Open more flagships in major cities • Open smaller stores for fragrance & beauty in outside city areas but same concept

Supply chain • Although supply chain is efficient could focus on more manufacture in UK • Focus on trying to make entire supply chain more sustainable than already is

Ecommerce

CSR • Could create more one-off pieces for charity/ auctions for most loyal customers

Pricing strategy

Finance • Financials have been up and down in sales and profits- need to build further loyalty to encourage consistency • Need to curb the “ubiquity” label currently being placed on global luxury brands • Differentiation in product strategy and offering- offer limited edition • Possibly venture into couture level of clothing to keep a level of exclusivity • Offer further bespoke services to enhance customer experience • Focus on loyal existing customers as well as placing a lot of energy on new markets • Could increase amount of seasonal collections to keep interest and constant level of sales-

Burberry- need further unique product to keep “luxury” level

Appendice 22: Fishbone analysis: Product opportunities